The beginner's guide to actually setting financial goals

2021-03-03
The power of any decision  is in the doing The power of any decision is in the doing

So how do you actually start setting financial goals?

By now you’ve had a chance to read the ‘thinking’ part of making financial goals and decisions, it's time to start the ‘doing’.

It's no secret the COVID19 pandemic has hurt many Australians and has either derailed many of us from our financial goals or has forced us to re-prioritise our current situation.

With historically unusually low interest rates, many Australians are now prioritising their debt and looking for strategies to consolidate and pay down credit card debt much faster than they previously had planned.

This is a great step, but how do we make sure it's just not just another stand-alone opportunity to take and miss the chance to pause and refocus our thinking about what we all actually want to be doing?

Jump Ahead

We all set goals every day often unconsciously

A lot of goals are small and unconscious habits: to get out of bed on time (maybe), to only check emails 4 times a day, to spend more quality time with the kids and remember to be more emotionally present at date night.

  • Some goals are more long-term - study, exams and higher education.
  • Others are more constant and relate just to work or our personal and financial lives.

For many people working in jobs that require them to make decisions all day, by the time they get home they feel all ‘decisioned out’ and thinking about their own personal financial goals or their families is the last thing they want to do after a hard day.

Decision overload

It's not surprising that many people who work in businesses and make decisions about million dollar budgets feel too tired to tangle with their own personal spending plan when they get home.

Add to that the shame that many people feel about ‘financial decisions’ and ‘doing better’ and it's fair to say our personal goal setting attention span is not good.

If its not on your map you probably won't go there

Financial goals are a lot like the GPS in our smartphone or our car; both guiding us towards where we want to go (as long as we enter the correct address).

  • Most people agree that without a goal, it's easier to get lost, (like grocery shopping without a list), perhaps fall prey to a scam or even get stuck in a pit of endless procrastinating waiting for just the right time to invest, start savings, buy a property, sell a property, consolidate credit card debt or even write a book. The power is in the 'doing'.

Without a direction it's easy to get lost and even end up taking a hasty path that actually leads us so far off track that finding our way back becomes a real problem.

Procrastination through waiting for perfection, is a common enemy of us all.

What most people miss when thinking about goals

There are lots of systems that promise to help us all make better goals even SMART Goals - but my experience has been they usually forget about human nature and all miss a very practical step:

Before you make a goal, human nature usually requires a good enough reason.

In our world of multiple choice, we all face the daily overwhelming effect of too much choice.

Perhaps you're already swamped with work and simply don't have the time to learn something new, change a habit or do whatever a goal requires as the first step. Maybe your financial confidence level at the moment is not what you wish it was and setting new goals just feels like a burden –

Welcome to the modern human condition.

Kick start your thinking about meaningful goals - you've got this

Procrastination can take many forms and perfectionists often avoid learning new things out of fear of messing up; but they're not the only ones with avoidance issues.

  • But heading in the general right direction is better than not heading anywhere at all.

Here are four useful steps to actually making a more meaningful financial goal (and bring it to life).

1.  First, find some quiet time

We all bring our own money issues (and biases) with us to our goal making process and recognising that money matters are also emotional matters, is part of understanding what makes us all human.

Finding time to slow down and get off that busyness treadmill for a day helps us set aside the needed time and energy to start thinking more about where we’d want to go in life and what's meaningful to us; and money is part of the resources that we all need to use better.

Start with these six personal questions to help bring a sense of intentionality to your goal setting and planning.

Both successful people and unsuccessful people have very different patterns of thinking about money; their use of time and also the sequence of actions they take in setting goals and planning to get ahead.

2. Prioritise your goals first (you don't have to make them all at once)

What's your top three personal financial goals?
Do you know your parents' top three goals as well?
And what might be your partners top three financial goals?

If you don't know, this might be a great way to start your ‘doing’. You are the only person who can make your own list of goals because everyone will have different goals and different ways of prioritising their goals.

For starters, first make sure you;

  • Known your base numbers eg: how much will you earn over your lifetime,
  • Known what's important to you today, tomorrow and later, and
  • Know what are your personal non-negotiables when it comes to living (for example if you really like having a backyard and a dog and that's a non-negotiable part of how you want to live your life,you’ll have to make you financial goals around those key non-negotiable priorities)

3. Do your own homework so you can think bigger and see further

With shortening attention spans and so much more ‘information static and advertising’ to cut through, it's amazing many people actually find a way through the noise and start to take control of their own information resources - and that's part of the recipe for success.

It's not just taking action, it's knowing what action to take when and why (what actions to avoid too) and learning what's actually possible in your life and future.

  • Researching your options makes you feel more in control.
    When considering different options available to you, you’ll also have to consider how you would feel if you took each option. If you don't do this homework first, you’ll find out the answer the hard way later.
  • Attach a price tag to each option (for example a common question I suggest my clients ask themselves when making a financial decision is, ‘how long will I have to work to afford that?’
    Now a word of caution here - don’t let a knee jerk reaction to a large price tag automatically put you off, because you can save for and chip away at that goal and its price tag (that's a cool thing about making goals - you step-by-step your way through them).
    A second word of warning is don't just ask yourself, ‘which credit card has enough room for this new expense to add to?’
  • Learning about the right sequence to take might sound like common sense but it's not always that common. You need to understand the sequence.
    • An obvious example is people travelling overseas, having a serious accident and then wishing they’d taken out Travel Insurance before they left the country - you need to get the sequence right.
    • A less obvious example might be a person wanting to set up life insurance policy who decides to go get a physical first - only to find out they now have a significant melanoma that requires more investigation and a new heart murmur that requires a ECG echocardiograph test - get your insurance in place first, then go see your Doctor for a check up - you need to get the sequence right.
    • Another example is people who cancel their Income Protection policy when they change jobs because their super fund has a salary continuance policy- not realising, a super fund insurance policy is usually the lowest grade of policy available, because it's built to be the cheapest available too - you need to get the sequence right.

4. Set a spending budget to make it all happen.

Am I telling you to spend money? Absolutely! Just create a spending plan before you commit to the big stuff so you get the best value for your hard earned dollars.

Know your key numbers - what is the take home amount of income you have to work with each month?

  1. Know your regular bills each month ie: Know your rent or mortgage repayments and investing saving/commitments
  2. Know your food and quarterly utility bills.

Pro Tip: Check in with your over the horizon planning just to make sure you're not hearing into an expensive time of the year for you.

Knowing your two key numbers helps you quickly see what you're working with and if there's a gap between what you earn and how much you owe.

And if your income is not enough to cover your expenditures and put money aside to save for a goal - it's time to cut cost - can you do without 3 movie streaming services - and maybe time to learn more and make more money - time for a better paying job, or do you need to consolidate debts and refinancing to a lower interest rates and start paying down debt.

Yep, give yourself permission to spend money, spend time or allocate resources to your goal - (unless your goal is not to :) ) and put the numbers on paper to see what it will take to make it happen.

Make sure your money goals are flexible (and actually matter).

Contact us today and see if we're the type of people you'd like to work with.

Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Westpac Businesses of Tomorrow National Awards. Drew writes for successful Small Business Owners and Entrepreneurs at Smallville, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

drew browne pic

Drew Browne

Sapience Founder & Director.
Simplifying Financial Complexity

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